PZ Cussons to exit Nigerian edible oils business with $70m Wilmar deal as FY25 outlook narrows

PZ Cussons plc (LSE: PZC) has announced the sale of its 50% stake in PZ Wilmar Limited to joint venture partner Wilmar International Limited for $70 million, as part of its broader strategy to reshape its global portfolio and reduce exposure to macroeconomic volatility in Africa. The deal, expected to close in the final quarter of calendar 2025, comes alongside a narrowed full-year profit forecast for the financial year ended May 31, 2025, impacted by softness in the Group’s premium U.S. skincare brand, St. Tropez.

The divestment marks a pivotal moment in the Manchester-based consumer goods company’s portfolio transformation plan, which was initiated in April 2024 to optimize capital allocation across geographies and categories.

Why is PZ Cussons divesting its stake in PZ Wilmar and what does it mean for its portfolio transformation strategy?

PZ Cussons has been actively reassessing its operational footprint following a strategic review of its business segments and geographic focus. The Nigerian edible oils venture, PZ Wilmar, was identified as a non-core asset in this review. By selling its 50% shareholding to Wilmar International, the British consumer goods manufacturer exits a category marked by high volatility and regulatory unpredictability in Nigeria, while achieving a cleaner capital structure.

The deal is expected to generate $64 million in net proceeds after taxes, legal fees, and transaction costs. These proceeds will be used to reduce gross debt and improve banking covenant metrics. If completed as expected in Q4 2025, the transaction would materially lower gross debt from £158 million to £111 million on a pro-forma basis—marking a 30% reduction and easing pressure on cash reserves and financing costs.

The sale is not expected to disrupt operations at PZ Wilmar, which will remain fully functional under Wilmar International’s management. The brand portfolio, including Mamador and Devon King’s—both market leaders in Nigeria’s edible oil segment—will continue to operate uninterrupted, preserving brand equity and employee continuity.

How has PZ Wilmar contributed to PZ Cussons’ financials and what impact will its exit have on operating performance?

Formed in 2010, PZ Wilmar was one of Nigeria’s largest sustainable palm oil ventures, leveraging local manufacturing scale and brand dominance to deliver consistent profitability. In the first half of FY25, the joint venture contributed £4.7 million in adjusted operating profit and £2.5 million in cash flow through partial repayment of shareholder loans. While profitable, the JV also added structural complexity and exposure to currency risk, regulatory shifts, and inflationary headwinds.

The disposal of the stake will result in a profit on disposal and will be reflected as such in the FY26 accounts once completed. The strategic upside, according to company executives, lies in simplification of operations and capital reallocation toward faster-growing segments—such as personal care and baby categories across Europe and Southeast Asia.

Analysts suggest that while the exit may trim earnings contribution in the short term, the long-term benefit of reduced exposure to FX volatility and better capital efficiency aligns with investor expectations for streamlined operations.

What is the updated FY25 guidance and how did different regions perform during the year?

PZ Cussons now expects to deliver approximately 8% like-for-like revenue growth for FY25, with reported revenue nearing £505 million. However, the Group narrowed its adjusted operating profit guidance to a range of £52 million to £55 million—down from the previously communicated £52 million to £58 million range.

The earnings revision reflects two key factors. First, the United Kingdom business incurred an unplanned £2 million charge due to Extended Producer Responsibility (EPR) environmental costs. Second, the Group’s premium beauty brand, St. Tropez, experienced double-digit revenue decline in the U.S. market during the second half, which significantly affected Group profitability.

Performance across regions was otherwise mixed but generally resilient. Africa led revenue growth, driven by pricing power in Nigeria amid high inflation. In Asia-Pacific, Indonesia returned to growth in H2 after a soft first half. In Australia and New Zealand, sales were lower year-on-year due to a challenging retail environment, though PZ Cussons gained market share. European revenues remained flat overall, but stronger performance in the UK and other European countries helped offset U.S. weakness.

Institutional investors have responded cautiously but constructively, noting that while U.S. performance remains a concern, the Group’s underlying sales momentum and cost control initiatives have mitigated broader downside risk.

How will debt reduction reshape PZ Cussons’ capital position and investor perception going into FY26?

Gross debt at the end of FY25 stood at £158 million, reflecting modest improvement from £167 million at the end of FY24. However, the proceeds from the Wilmar stake sale will accelerate deleveraging significantly. On a pro-forma basis, gross debt would drop to £111 million—an improvement welcomed by credit analysts and institutional shareholders alike.

This strategic deleveraging is expected to enhance the Group’s financial flexibility, reduce interest burdens, and improve terms on future financing lines. It also allows management to reinvest more confidently in innovation, marketing, and digital transformation across its core brands.

According to institutional sentiment, the decision to redeploy capital away from legacy joint ventures and into high-growth product categories aligns with broader market expectations for consumer goods firms navigating inflation, margin compression, and shifting consumer preferences.

What are the long-term implications for PZ Cussons’ growth strategy and brand focus?

Chief Executive Officer Jonathan Myers stated that the divestment allows PZ Cussons to concentrate on building stronger brands within a more focused portfolio. This reflects the Group’s ambition to become a leaner, brand-led business capable of delivering sustainable, profitable growth. Myers also reaffirmed that operations at PZ Wilmar will continue smoothly under Wilmar International’s full ownership, ensuring minimal disruption for local employees and consumers.

Looking ahead, PZ Cussons is expected to double down on its presence in categories like baby care, hygiene, and beauty, while scaling key brands such as Carex, Imperial Leather, and Cussons Baby. Growth markets in Southeast Asia and Europe remain focal points for this strategy, with digital channels, direct-to-consumer platforms, and ESG-aligned initiatives serving as catalysts for expansion.

Investors will be closely watching the full FY25 results scheduled for release in September 2025 for further clarity on segment margins, cost base adjustments, and capital allocation plans post-divestiture.